SHERIFFDOM OF SOUTH STRATHCLYDE DUMFRIES AND GALLOWAY

 

F152/09

	JUDGMENT OF SHERIFF PRINCIPAL B A LOCKHART
	in the cause
	ANDREW DAVID HUGHES
	Pursuer and Appellant
	against
	MRS MARILYN DOUGLAS or HUGHES
	Defender and Respondent

 

Act: Mrs V Raymond, of McJerrow & Stevenson

Alt: Mrs C McKenzie, of John Henderson & Sons

 

 

 

DUMFRIES: 19 August 2011

 

The Sheriff Principal, having resumed consideration of the cause refuses the appeal and adheres to the Sheriff's interlocutor of 9 June 2011 complained of; remits the cause to the Sheriff to proceed as accords; finds the pursuer and appellant liable to the defender and respondent in the expenses of the appeal; allows an account thereof to be given in and remits same when lodged to the Auditor of Court to tax and to report.

 

 

NOTE:

 

Background to the appeal

 

1.             On 5 August 2009 the appellant raised an action for divorce against the respondent on the grounds that the marriage had broken down irretrievably by reason of the parties' non-cohabitation for a period in excess of two years. A warrant to cite was granted on that date. There was no further procedure until 19 March 2010 when the respondent's solicitor accepted service on behalf of the respondent. A notice of intention to defend was lodged and the timetable was fixed by the Sheriff Clerk at Dumfries on 24 March 2010.

 

2.             On that date the defender lodged a motion moving the court to sist the proceedings pending determination of the defender's legal aid application. This was unopposed and the case was sisted on 1 April 2010.

 

3.             On 30 May 2011 the respondent lodged a motion moving the court to recall the sist granted on 1 April 2010 and to grant warrant to arrest on the dependence in terms of crave 3 of the defences which were lodged with the motion. The defences inter alia stated:

"3. The applicant is seeking the grant under section 15E(1) of the 1987 Act of Warrant for Diligence (or section 9D(1) of the 2002 Act of Interim Attachment) in advance of a hearing on the application.

4. The defender understands the pursuer has sold the former matrimonial home Innesfree, 4B Barnhill, Dumfries. The defender considers that the pursuer's disposal of said property is with the intention of defeating her claim for a financial provision on divorce. Said property is valued in the region of £400,000. In the event that the pursuer intermits with the proceeds of sale, he may not have the resources with which to meet the defender's claim for a capital sum. He has previously stated that his financial position has altered to the extent that he required to apply for legal aid to provide him with the ability to progress the divorce proceedings. The defender is concerned that the pursuer, on receipt of the proceeds from the sale of the former matrimonial, will transfer those funds to a third party thereby defeating her claim. She accordingly seeks warrant to arrest on the dependence of the action."

 

4.             This motion was heard and granted by the Sheriff on 9 June 2011.

 

5.             The matters on which the court requires to be satisfied before granting warrant for diligence on the dependence in terms of section 15F(3) of the Debtors (Scotland) Act are:

"(a) the creditor has a prima facie case on the merits of the action

(b) that there is a substantial risk enforcement of any decree in the action in favour of the creditor would be defeated or prejudiced by reason of-

(i) the debtor being insolvent or verging on insolvency or

(ii) the likelihood of the defender removing, disposing of, burdening, concealing or otherwise dealing with or some of the debtor's assets

where warrant for diligence on the dependence is not granted and

(c) that it is reasonable in all the circumstances, including the effect granting warrant may have on any person having an interest, to do so."

 

6.             In the defences, which were lodged with the motion the defender and respondent craves the court:

"1. To make an order in terms of section 16(1)(b) of the Family Law (Scotland) Act 1985 setting aside the Minute of Agreement between the parties dated 14 De4cmeber 2007.

2.               To grant decree against the pursuer for payment to the defender of a capital sum of £350,000 with interest thereon at the rate of eight per cent per year from such date as to the court seem appropriate until payment.

3.               To grant warrant to arrest on the dependence of the action.

4.               To find the pursuer liable in the expenses of the action."

As far as condition (a) of section 15F(3) of the Debtors (Scotland) Act is concerned, in condescendence 5 reference is made to a Minute of Agreement entered into between the parties dated 14 December 2007. It is said on behalf of the respondent that the Agreement was neither fair nor reasonable in its terms, that the appellant applied unfair and undue pressure on the defender to obtain her signature on the document and she was given limited time to consider the terms of the Agreement and legal advice. The defender avers that she was forced to sign the Agreement without legal advice on its terms. She claims the Minute of Agreement does not represent a fair division of the net matrimonial property at the relevant date. Before the Sheriff it was said that the result of the Minute of Agreement was that the appellant received property worth about £400,000, while the respondent received about £130,000. The Sheriff in his note records that, on the basis of this information, he was satisfied that the defender had a sufficient prima facie case under section 16 of the Family Law (Scotland) Act 1985 in terms of crave 1. This satisfied condition (a) of the statutory test.

 

7.             As far as condition (b) is concerned the respondent avers that the appellant has sold the former matrimonial home. She avers that she considers the disposal of the property is with the intention of defeating her claim for financial provision on divorce. The property is valued in the region of £400,000. In the event that the pursuer intromits with the proceeds of sale, he may not have the resources with which to meet the defender's claim for a capital sum. The defender is concerned that the appellant, on receipt of the proceeds from the sale of the former matrimonial home, will transfer those funds to a third party, thereby defeating her claim. Indicating he was satisfied as far as condition (b) was concerned, the Sheriff records that he was principally moved by two significant concessions on the part of the pursuer's agent, namely that the former matrimonial home had been sold without the knowledge of the pursuer's usual solicitors who were conducting his matrimonial case and that the agent appearing before him was unable to say where the free proceeds of sale were. In these circumstances the Sheriff concluded there was a real and substantial risk that enforcement of any decree in favour of the defender would be defeated or prejudice by reason of the likelihood of the pursuer removing, disposing of, concealing or otherwise dealing with that part of his assets.

 

8.             As far as condition (c) is concerned, the Sheriff records that he has no note, or has he any recollection of having been provided with information as to the effect on any third party.

 

9.             In these circumstances the Sheriff granted warrant to arrest on the dependence. It is against that decision that this appeal is taken.

 

Submissions for parties

 

10.         I consider, that, rather than narrate the whole submissions of the appellant and then the whole submissions of the respondent, it would be more appropriate to deal separately with the submissions in respect of the three requirements in terms of section 15F(3) of the 1987 Act before an order granting warrant for diligence on the dependence can be made. I will record the submissions of both parties in respect of the requirements contained in each subsection and then comment thereon:

 

(a) the creditor has a prima facie case on the merits of the action

 

(i) Submissions for the appellant

11.         It was submitted on behalf of the appellant that the respondent had failed to show there was a prima facie case on the merits of the action. I was referred to Gillespie v Toondale Ltd 2006 SC 304 at paragraphs 12 and 13 where Lady Cosgrove, giving the opinion of the court said:

"12. In the course of the argument before us reference was made to the cases of Karl Construction Ltd v Pallisade Properties PLC and Barry D Trentham Ltd v Lawfield Investments Ltd, both decisions of Lord Drummond Young in the Outer House. In Barry D Trentham Ltd Lord Drummond Young discussed the relevance of the existence of the defence to the pursuer's claim and said (para 19).

"[T]he existence of a defence may cast doubt on the pursuer's prospects of success in the action. If the doubt is sufficiently substantial, it may not be reasonable to grant judicial security in respect of the pursuer's claim. In Karl Construction Ltd v Palisade Properties plc I suggested that, before inhibition on the dependence could be granted, the pursuer required to establish a prima facie case on the merits of the action. I intended this test to be a substantial hurdle for the pursuer to surmount. The expression "good arguable case", used in English law in relation to Mareva injunctions, may give a good idea of what is intended. If, at the stage of a motion for recall, an apparently substantial defence is put forward to the pursuer's claim, it is in my opinion appropriate for the court to scrutinise the claim and the defence and to determine whether in all the circumstances inhibition is appropriate, or whether it should be recalled, either absolutely or subject to conditions. This is in my view an aspect of the requirement of a prima facie case, in the sense of a good arguable case; if there is an apparently substantial defence to the pursuer's claim it is difficult to say, on the basis of the whole of the material before the court, that that claim amounts to a good arguable case. If no substantial defence is put forward, of course, all that the court requires to consider is whether the pursuer has set out a good prima facie case.

13. We agree with that approach. In particular, it is in our opinion necessary for the court at the stage of a motion for recall to consider the pleadings as a whole, both pursuer's averments and the defence stated, and the submissions made by both counsel to determine whether, in all the circumstances, inhibition is appropriate on the basis of the existence of a prima facie case. We also agree that the prima facie test is a substantial hurdle for the pursuer to surmount. It was not sufficient for him to advance a colourable case. Grant of judicial security and the serious interference with the defender's property warrants the application of a higher test ..."

It was submitted that the respondent had at best submitted a colourable case. She did not have a clear prima facie case. The Sheriff had relied upon averments that the respondent received property valued in the region of £130,000 in terms of the Minute of Agreement as contrasted to £400,000 for the appellant. It was said the mortgage would require to be paid from the proceeds of sale. In addition the respondent had received entitlement in terms of the Minute of Agreement including alimentary payments, payment of a mortgage, provision of a car and fuel and payments towards holidays, all factors that would require to be taken into account when considering whether the Minute of Agreement was fair and reasonable. The Minute of Agreement had been in force for nearly four years during which time the respondent had sought to enforce and receive the benefit of the terms of the Agreement on a number of occasions. It was submitted the respondent had taken legal advice at the time of entering into the Minute of Agreement. It was said that at the time there had been no adjustment of the pleadings regarding the Minute of Agreement. The issue of whether the Minute of Agreement was fair in terms of section 16 of the Family Law Act 1985 would require to be dealt with at proof. It was submitted there could not be a prima facie case without proof. No evidence had been submitted for the respondent. She had only provided the pleadings and a copy of the Minute of Agreement. It was not sufficient to assume that because a Minute of Agreement provides for unequal division of the matrimonial assets that it is unfair and unreasonable (Gillon v Gillon 19995 SCLR 405). It was submitted that the Sheriff had erred in law in holding that there was a prima facie case.

 

ii. Submissions for the respondent

12.         For the respondent, it was submitted that the written pleadings for the respondent did disclose a prima facie case. I was referred again to Gillespie v Toondale Ltd supra. It was said that the appellant's agent before the Sheriff had not advanced a "substantial defence". The Sheriff was entitled to consider the averments of the respondent. The Sheriff was entitled to take these averments pro veritate. The Sheriff was entitled to consider those averments together with the submissions advanced on behalf of the pursuer and appellant and to determine in all the circumstances whether the granting of the warrant was appropriate. The appellant's agent was unable to answer specific questions posed by the Sheriff in respect of the whereabouts of specific assets. Given the nature of the hearing on 9 June 2011, such information should have been produced. On the basis of the whole of the material before the court, the defender and respondent's case amounted to a "good arguable case".

 

13.         It was noted that it had been submitted by the appellant that the effect of finding that there was a prima facie case on the merits of the action was to indicate that the court believed the Minute of Agreement to be unfair. It was submitted that this interpretation was incorrect. A finding of a prima facie case on the merits of the action was based upon balancing all the information before the court at the time of the hearing and deciding whether there is a "good arguable case" in light of this. Reference was made to Gillespie. This was not the same as reaching a decision on the merits of the case.

 

14.         It was noted that it had been further submitted by the appellant that it was not sufficient for the Sheriff to assume that, because the Minute of Agreement provided for an unequal division of the matrimonial assets, it was unfair and unreasonable. Reference was made to the case of Gillon v Gillon 1995 SCLR 405 in support of this point. It was submitted that the Sheriff had not assumed the Minute of Agreement was unfair and unreasonable. The Sheriff came to a conclusion as to whether the defender and respondent had a prima facie case based upon her averments in the defences and of submissions made by both parties' respective agents. It was accepted that the fairness and reasonableness of the Minute of Agreement would require to be tested at proof. It was accepted that an unequal division of the matrimonial assets did not automatically render a Minute of Agreement unfair as decided in Gillon. In applying the ratio decidendi of Gillon, an examination of all the relevant circumstances leading up to and prevailing at the time of the execution of the agreement would be necessary. The defences clearly stated upon what basis the Minute of Agreement was being challenged leading up to and prevailing at the time of the execution of the Minute of Agreement. This went further than merely suggesting there was an unequal division of the matrimonial assets. The averments taken pro veritate satisfied the test in Gillon.

 

My observations of these submissions

 

15.         In my opinion the submissions on behalf of the respondent are well founded. The material contained in condescendence 5 for the respondent, to which the Sheriff refers in his note and which is summarised in paragraph 5 hereof, entitled the Sheriff to hold that the respondent had a prima facie case under section 16 of the Family Law (Scotland) Act 1985. On the face of her defences the division of assets was manifestly unequal. The respondent's position was that she was forced to sign it without legal advice on its terms. In my opinion submissions made to me about certain payments that the respondent had received in terms of the Minute of Agreement, the value of which were not specified, were insufficient for me to conclude that the Sheriff had not been entitled to take the view which he did. It may well be that, after proof, the respondent may find that she is unable to substantiate her case under section 16 of the Family Law (Scotland) Act 1985. It is not my task at this stage to judge her prospects of success. My task is to decide whether, on the material available to him, the Sheriff was entitled to conclude that there was a prima facie case. I am satisfied he was so entitled. Nothing in the submissions made to me at the appeal caused me to take the view that this conclusion was unreasonable and wrong.

 

(b) the likelihood of the debtor removing, disposing of, burdening, concealing or otherwise dealing with all or some of the debtor's assets where warrant of diligence not granted

 

(i) Submissions for the appellant

16.         It was submitted on behalf of the appellant that the respondent had not shown that the appellant was likely to conceal or attempt to dispose of assets. It was submitted it was not reasonable to assume that the appellant was likely to behave in this manner simply by the virtue of the fact that the agent for the appellant was not aware where certain assets and funds where at the time of the case calling. It was said that the appellant had chosen to market the property at 4B Barnhill, Hardthorn Road, Dumfries with his former, non court solicitor. The appellant had a long running relationship with these agents. It was submitted it made sense to market the property with a firm in Dumfries rather than with the court agents who were based in Lockerbie. It was submitted that the fact that the appellant had chosen different agents to sell a property and deal with the divorce did not mean there was a real and/or substantial risk that enforcement of any decree in the action in favour of the creditor would be defeated or prejudiced by reason of the likelihood of the debtor removing of, disposing of, burdening, concealing or otherwise dealing with all or some of the debtor's assets where warrant for diligence not granted.

 

17.         It was submitted that the respondent had the opportunity to seek interim interdict preventing the appellant from intromitting with proceeds from the sale of the property but had not done so. The property had been on the market for a number of months. It was suggested that interim interdict in these terms would have been an appropriate and proportionate remedy for the respondent to seek. As far as legal aid was concerned it was submitted that if the appellant received funds in the region of £400,000 he would not be eligible for legal aid. The legal aid application has now been withdrawn.

 

ii. Submissions for the respondent

18.         It was noted on behalf of the respondent that it had been argued on behalf of the appellant that it was not reasonable to assume that because his agent did not know of the whereabouts of certain assets and funds at the time of the case calling the above test was satisfied. The whereabouts of the free proceeds of sale would have been known to the appellant. It was submitted that, had he no intention of trying to defeat the respondent's claim, he would have made such information available to his agent. The Sheriff was therefore entitled to conclude that there was a real and substantial risk that enforcement of any decree in favour of the respondent would be defeated or prejudiced by reason of the likelihood of the appellant removing, disposing of, concealing or otherwise dealing with that asset.

 

19.         It had been submitted by the pursuer and appellant that a more appropriate remedy for the defender and respondent would have been to seek interim interdict to interdict the pursuer from intermitting with the proceeds of sale of the former matrimonial home. It was submitted that this was not an appropriate remedy. An interdict was a remedy granted by the court either against a wrong being done or against an apprehended violation of a party's rights, neither of which were apparent in this case.

 

My observations

20.         Having decided that the respondent had established a prima facie case, the Sheriff then required to apply his mind to the likelihood of the appellant removing, disposing of, burdening, concealing or otherwise dealing with all or some of his assets where warrant of diligence not granted. The Sheriff stated that he placed reliance on answer 6 of the defences which I have been summarised in paragraph 7 hereto. He concludes that he was principally moved by two significant concessions on the part of the appellant's agent: that the former matrimonial home had been sold without the knowledge of the appellant's usual solicitors who were conducting his matrimonial case and that the agent appearing before him was unable to say where the free proceeds of sale were. Because of the lack of clarity as to where the proceeds were, the appellant's financial eligibility for legal aid was not clear. In these circumstances the Sheriff concluded that there was a real and substantial risk that enforcement of any decree in favour of the respondent would be defeated or prejudiced by reason of the likelihood of the appellant removing, disposing of, of concealing or otherwise dealing with that part of his assets.

 

21.         In my opinion that was a conclusion which the Sheriff was entitled to reach. It is clearly in the interests of justice that, at a time when the question of whether the Minute of Agreement should be reduced is in issue, the appellant's assets should be preserved. The Sheriff was entitled to conclude that the concerns which he outlined gave him reasonable cause to believe that, if the order was not granted, there would be a real and substantial risk that enforcement of any decree in favour of the respondent would be defeated or prejudiced.

 

(c) it is reasonable in all the circumstances, including the effect granting warrant may have on any person having an interest to do so

 

i. Submissions for the appellant

22.         It was submitted the appellant had business interests in Palmerston Furniture and Pine Direct. It was suggested that no consideration had been given to the effect that the granting of warrant for diligence could potentially have on the appellant's business interests.

 

ii. Submissions for the respondent

23.         It was submitted by the respondent that at no stage in these proceedings was any reference made to the existence of the appellant's business interests or to any business partner of the pursuer and appellant in terms of section 15F(1) of the Debtors (Scotland) Act 1987 which states:

"At the hearing on an application for warrant for diligence on the dependence, the court shall not make any order without first giving (a) any person to whom intimation of the date of the hearing was made; and (b) any other person the court is satisfied has an interest, an opportunity to be heard."

Had there been reference to such an interested party at the hearing before the Sheriff, the hearing could not have proceeded as court would have been required to give that person an opportunity to be heard.

 

24.         The appellant made reference to the respondent's averments in support of his submission to the extent that the respondent averred that the appellant had business interests in Palmerston Furniture and Pine Direct in Article 7 of her defences. The defences refer to the appellant's financial interest in his businesses. There was no known interested party at the date of the hearing and there was no information before the Sheriff to suggest otherwise. It was noteworthy that the appellant had not disclosed details of any purported person with an interest in these proceedings.

 

My observations

25.         There was no issue placed before the Sheriff that there was any party with an interest to whom these proceedings should be directed. Had that been the case, the Sheriff would have required to continue the application in terms of section 15F(1) of the 1987 Act to allow such a person the opportunity to be heard. The Sheriff cannot be faulted for the course he took as there was no question of an interested party raised with him.

 

Decision

 

26.         The Sheriff was obliged to consider whether it was reasonable in all the circumstances to grant the application. I take the view that the Sheriff was entitled, on the basis of the information before him, and indeed on the basis of the information placed before me at the appeal hearing, to reach that conclusion. This was a discretionary decision by the Sheriff. There was no material before me to allow me to reach the conclusion that I should interfere with his decision on the basis that it was unreasonable and wholly wrong.

 

27.         The test of reasonableness was one of judicial discretion. Reference was made to the well known passages in Macphail, Sheriff Court Practice, third edition, paragraph 18.110 - 18.113: The Sheriff in my opinion exercised his discretion reasonably in respect of the information he had before him. There was no error in the balancing exercise which he undertook. There has been no change of circumstances since the date his interlocutor was pronounced. Taking all the circumstances of the case into account, it was reasonable for the Sheriff to grant warrant to arrest on the dependence. The appeal is accordingly refused. I have awarded the expenses of the appeal to the respondent.